Mexico is a major producer of hydrocarbon fuel in the Western Hemisphere.
The future of the Mexican oil and gas industry depends in part on privatization.
I. PRIVATIZATION OF PEMEX WILL NOT BE EASY.
<<< At present, it is increasingly unlikely that Mexico will privatize its oil fields and the state's shares in the national oil production company PEMEX. >>>
Mexico has recently elected a new government, which could make it more difficult to privatize the country’s remaining oil reserves. The new government tends to be more left-wing. While the previous government had planned at least a partial privatization of state assets, this is now less likely with the new government.
Mexico still has large oil reserves, even if production rates continue to decline year after year. This obviously makes Mexico less attractive for foreign investors. Larger investments in Mexico’s oil infrastructure could come from the United States. The USA is investing heavily in the Mexican oil fields.The Mexican oil fields need more and more capital to maintain production rates. New financial injections are necessary to maintain the oil fields and production rates.
In the case of privatization of state assets, the United States is expected to be the main beneficiary of privatization. This can be a real conundrum, since the Mexican government could only grant rights of use to the oil-producing areas, but would not privatize ownership of the land. The areas that are no longer financially viable will be given to foreign investors.
II. ENERGY POLICY IN MEXICO IS DETERMINED BY THE VAGARIES OF THE ECONOMY.
<<< NAFTA is being renegotiated, which affects economic relations between Mexico and the United States. >>>
It is very likely that changes in the new NAFTA Free Trade Agreement will also bring about changes in the energy industry. Mexico’s oil exports are likely to be affected in one way or another. It is also very likely that it will be more difficult for U.S. companies to invest directly in the Mexican energy market, as trade will be more restricted overall. But that is not yet clear.
III. RISK OF ENERGY CONFLICT BETWEEN MEXICO AND THE U.S.
<<< Between the United States and Mexico, in some cases there are border disputes that can dispose of the deposits of raw materials. >>>
Many of Mexico’s oil reserves are located near the Gulf of Mexico. The Gulf of Mexico is geopolitically monitored mainly by the United States. The fact that a large part of the remaining oil resources are located in the Gulf of Mexico could possibly lead to energy conflicts between the United States and Mexico. In some cases, the two countries claim resources that cross national borders.
IV. ENERGY COOPERATION BETWEEN THE UNITED STATES AND MEXICO
<<< The advantages of privatization are that Houston, Texas, is one of the main centers of oil production and processing and is geographically close to Mexico. >>>
Since Houston is home to some of the most advanced oil refineries, the two countries would complement each other in oil production and processing. The geographical proximity between Mexico and Texas would be logistically very advantageous for Mexico and Texas.
V. OUR ASSESSMENT OF MEXICO’S ENERGY POLICY
<<< Conclusion: From our point of view, there are many good reasons to privatize now. >>>